Wyoming to tax remote sales starting February 1, 2019

Wyoming was an early adopter of economic nexus, which imposes a sales tax collection obligation on out-of-state sellers with substantial economic activity, but no physical presence, in a state. Its economic nexus law was set to take effect July 1, 2017, but it’s been on hold pending legal disputes. The Wyoming Department of Revenue now says it will enforce economic nexus starting February 1, 2019.

Under Wyoming’s economic nexus law, a remote seller triggers an obligation to collect and remit sales tax if, in the current or immediately preceding calendar year, it has either 200 separate transactions or $100,000 in gross sales in the state. Gross sales include taxable, exempt, and wholesale sales. According to the Department of Revenue, a “transaction” is an invoice: “Each invoice is a transaction.”

Although remote sellers aren’t required to comply with the law until February 1, 2019, the Department of Revenue invites qualifying remote sellers to voluntarily register prior to that date. It’s been waiting a long time to collect remote sales tax revenue.

The backstory

When Wyoming lawmakers enacted economic nexus in 2017, they knew it couldn’t be enforced. At the time, all states lacked the authority to tax sales by businesses with no physical presence in the state: The Supreme Court of the United States had upheld the physical presence rule in Quill Corp. v. North Dakota (1992).

Two separate groups — the American Catalog Mailers Association (ACMA) and NetChoice, and Newegg, Inc., Overstock.com, Inc., and Wayfair, Inc. — refused to comply with Wyoming’s law on the grounds that it was unconstitutional. In response, Wyoming filed two separate declaratory judgement actions. In each, the state acknowledged “that a declaration in its favor will require the abrogation of the United States Supreme Court’s decision in Quill Corp. v. North Dakota … and it will ultimately seek a decision from the United States Supreme Court to that effect in this action.”

Wyoming was prepared to defend its law before the Supreme Court of the United States, but South Dakota was a step ahead. Its similar economic nexus law, adopted in 2016, had also been declared unconstitutional by the ACMA and NetChoice, as well as by Newegg, Overstock, and Wayfair. And South Dakota v. Wayfair, Inc. made it to the Supreme Court of the United States.

On June 21, 2018, the Supreme Court ruled in favor of the state. The court overruled the physical presence requirement, finding the “economic and virtual contacts” Newegg, Overstock, and Wayfair had with South Dakota to be a sufficient basis for a sales tax collection obligation.

The Wayfair ruling paves the way for other states to tax remote sellers via economic nexus. Many swiftly adopted economic nexus policies in the wake of Wayfair: Some had laws waiting in the wings, ready to be enforced should Quill be repealed; others were quick to enact new legislation or adopt a department of revenue rule. As of this writing, approximately 20 states are enforcing economic nexus and close to 10 others have announced they’ll do so in the coming months.

Yet Wyoming has been unable to enforce its existing law because of the unresolved court cases: The declaratory judgement actions filed by the state triggered an injunction prohibiting the state from enforcing a sales tax collection obligation on remote sellers. Kim Lovett of the Wyoming Department of Revenue told Bloomberg Tax in July, “We can’t enforce anything while [litigation involving the state and Wayfair, Inc., Newegg Inc., and Overstock.com Inc.] is still alive.”

In August, Overstock agreed to collect and remit Wyoming sales tax, still, the state waited to announce an effective date. Now, the Wyoming Department of Revenue must be confident the case will be fully resolved. On October 29, 2018, it announced remote sellers would be required to collect sales tax “effective February 1, 2019, subject to court approval.”

Streamlined Sales Tax

Wyoming is a Streamlined Sales Tax (SST) member state. It’s one of more than 20 states to simplify sales and use tax administration, facilitating compliance for remote sellers.

Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.